The Central Bank of Nigeria (CBN) has issued its Customer Due Diligence Regulations 2023, which apply to financial firms that fall within its regulatory ambit, as it takes a firm stance against financial crime.
The Central Bank of Nigeria’s latest step aims to improve compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) legislation while harmonizing with worldwide best practices.
The CBN has made it essential for financial institutions to collect and verify customers’ social media handles as part of their Know Your Customer (KYC) procedures in order to improve the accuracy and depth of customer identification.
These new regulations, which supplement existing provisions outlined in the Central Bank of Nigeria’s Anti-Money Laundering, Combating Terrorism Financing, and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions Regulations of 2022, are intended to strengthen the fight against money laundering, terrorism financing, and proliferation financing.
Financial institutions must implement internal systems and procedures for completing customer due diligence measures for both potential and existing clients, including occasional consumers, under the new requirements.
Customers, whether persons or legal entities, must be identified, and precise information such as legal names, addresses, contact information, identity documents, account kinds, nature of banking relationships, and signatures must be obtained. Furthermore, the regulations underline the importance of identifying politically exposed individuals (PEPs).
Financial institutions must rely on reputable and independent source papers, data, or information to authenticate customer identities.
Individuals must validate their date of birth, residential address, contact information, and the validity of official papers.
Financial institutions are obligated to conduct searches on public registries or databases, analyze annual reports or related financial accounts, and examine board resolutions in the case of legal persons or legal arrangements.
The standards also underline the need of maintaining accurate records and consumer information.
Financial institutions must keep customer due diligence records, account files, business correspondence, and analysis results for at least five years following the termination or discontinuation of a commercial relationship or an occasional transaction.
Based on risk categories, regular evaluations of existing client records are necessary, with high-risk customers requiring annual reviews, medium-risk customers requiring reviews every 18 months, and low-risk customers requiring reviews every three years.
Section 6 (IV) of the new regulation requires financial institutions operating under the CBN’s regulatory scope to collect and verify customers’ social media handles as part of their KYC procedure.
Individuals and legal companies are also subject to this rule.
Incorporating social media handles into KYC criteria seeks to improve the accuracy and depth of consumer identification.
Financial institutions can acquire significant insights into their customers’ online presence and activity by obtaining this additional information, allowing for a better assessment of potential risks linked with money laundering, terrorism funding, and proliferation financing.
The CBN’s decision to incorporate social media accounts as a necessary KYC criterion acknowledges the growing significance and popularity of social media platforms in the daily lives of individuals and businesses.
It recognizes that social media can provide significant information about clients’ professional networks, affiliations, and future income streams.
Financial institutions will be expected to develop internal protocols and procedures for accurately collecting and verifying consumers’ social network handles.
This information, along with other KYC data such as legal names, residences, contact information, and identification documents, will be utilized to develop a thorough profile of the consumer.
The inclusion of social media handles in the KYC standards demonstrates the CBN’s commitment to keeping up with technology improvements and emerging financial threats.
The CBN intends to guarantee that financial institutions have a more comprehensive picture of their customers by adjusting rules to encompass digital footprints, fostering greater due diligence and risk reduction.
Individuals and businesses should be aware of their internet presence and activities as a result of this change.
Customers should ensure that the information they provide on social media platforms is compatible with their stated profiles and with their financial activities.
Financial institutions will use this information responsibly while adhering to strong data privacy and protection requirements.
